Everyone who applies for life insurance is specifically evaluated for coverage. Different insurance companies provide policies and premium rates in accordance with an applicant’s risk level. These life insurance ratings include premiums that must by approved by your state insurance commissioner prior to use. From that point, insurance companies place applicants in different risk categories which includes their age, health and lifestyle choices.
Tobacco use, for example, is a lifestyle habit tied into health risks and will impact which rating an applicant will be classified.
Sometimes an applicant, due to health issues or lifestyle factors, may not fit into the typical rate categories and will, instead, be assigned what is called a table rating. While obtaining coverage is still quite reasonable, table ratings come clearly with higher premium rates to those place in higher risk categories.
Risk categories are determined by statistics and a careful review by a life insurance company underwriter. All life insurance companies will look differently on the same applicant.
A basic understanding of how the life insurance company will evaluate you or another insured is important. Ultimately, this is what will determine your exact premium. A quote from a online source may or may not be accurate. It is only an estimate tool when properly used. There are many factors that determine the final outcome.
Select, Preferred or Standard, How The Carrier Determines Ratings For Life Insurance
When you apply for a life insurance policy, the life insurance company begins a process known as underwriting. During this time, they review all the medical, non-medical, financial risk factors as well feedback from your life insurance agent. This information is gathered from your life insurance application and any medical exam results. Some life insurance companies may conduct a phone interview to gain more information related to your family health history or add additional questions. Do not be offended. In most cases, this additional interviewing/questioning works in your favor on your rate or charges of the policy.
Once your information has been assessed, the life insurance company underwriter will make the decision which rate class you fall in based on your age, lifestyle, family health history, and overall health status. A key point to remember, every company has their own “standards” the use to put you in a particular rate class. We will not delve deeply into that here. The nuts and bolts is what we are after. While the names for specific life insurance company rating categories may differ between companies, the basic classifications are select, preferred, and standard. In addition, people who smoke will have their own category rating of either standard smoker or preferred smoker.
What’s the difference in the basic categories of life insurance ratings?
It’s very important to know that not all insurance companies follow the same life underwriting criteria for life insurance ratings. There are literally hundreds of carriers in the industry. As such, you could easily be rated as select by one company and preferred by another, simply because of that company’s individual underwriting guidelines vary. Here are the 4 main classifications life insurers will use:
A preferred select or just select rating is typically offered if you are in excellent health, fall into a normal height to weight ratio, and have a favorable family health history. For example, that no immediate family members have died from cancer or heart disease at an early age. There may also be other criteria involved, but these are the basics for qualifying for a select rating.
A preferred rating is also associated with very good health, but certain other factors gathered may indicate that you pose a slightly higher risk than someone who would qualify for a select rating. This can come from a few different factors, and really depends on how the particular life insurance company differentiates between a select and preferred rating. That is why it is important to work only with a seasoned, independent life insurance professional.
A standard rating is given to those who after application and underwriting review are determined to be an average risk or of average health. The insurer has determined based on full review of your application any medical exam and records that my have certain factors which make you ineligible for a select or preferred rating class. It does not necessarily mean you are in poor health. Most often, you meet what the insurer perceives as being in average health with family health histories like yours. This rating may also be do to past tobacco use, a driving history report, less than ideal height to weight ratio or even your current occupation.
Substandard or Table Rated is given to an insured applicant, who after a complete review of all required information, to have an elevated risk to the insurer beyond the standard rating. It can be due to health issues, lifestyle choices or even an occupation or hobby. Anything perceived by the insurance company’s underwriting to be higher risk will result in such a rating class. A substandard or table rated case is also know as High Risk Life Insurance. For more information on those high risk classifications, click here.
The Take Home
There are many factors that establish your life insurance ratings and premiums. This would also include the type of insurance applied for, the amount and length of coverage, as well as your risk rating. Once your application is submitted to an insurance company, they will review all information and render a decision. You will be given offer from this point or you may receive a decline if they are unable to insure you based on information they obtained in the underwriting process.
The ratings above are all based on non-tobacco use. Therefore, if you use it otherwise, your premium rates will be based on all the risks associated with being a user.
The most important thing to remember is… talk to an independent agent/broker. They are going to be your best resource to qualify for the best rate class which ultimately saves you money and time. Question the agent regarding the insurance company application if you think that you have been incorrectly rated up. Maybe you applied to the wrong insurer in the first place?
Take the time and find a seasoned life insurance broker or reach out to us at Special Risk Life. Our team is here to help. 269-230-3464
